Infrastructure - a sector ripe for government efficiencies

STORY HIGHLIGHTS

• The relative strength or weakness of the governance environment can help determine the quality of infrastructure.
• Infrastructure is an area where the government of the future can visibly demonstrate its efficacy, with knock-on effects for trust.
• To make progress, governments need to understand the governance constraints to infrastructure management and delivery they face.

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Different levels of infrastructure across countries can be explained partly by their specific contexts, including geographic traits and financial resources. As the figures below illustrates, huge infrastructure quality and spending gaps remain between countries. Crucially, pre-conditions also include different politicians’ and constituencies’ perceptions of the ideal policy combination on the one hand, and the right incentives for infrastructure development on the other. In other words, the relative strength or weakness of the governance environment can help determine the quality of infrastructure. These governance differences across countries are especially visible in natural monopoly industries, such as water and electricity utilities, ports, roads, and airports.

Often, incentives and special interests determine which public infrastructure investments are realized – these projects do not necessarily yield the social and economic benefits that their costs and prestige would warrant. More useful projects do not always provide as much status for politicians or bureaucrats.

However, the strength of public sector management and institutions is highly correlated with the quality of overall infrastructure. Thus, one key for governments is to achieve the necessary political buy-in for less politically prestigious infrastructure projects, such as sewage systems. Another is to learn lessons from past failures at home and abroad; poor infrastructure selection and management is possible in countries at every level of income.

Different levels of infrastructure in countries can be explained by unique pre-conditions that every country faces, including geographic traits and financial resources. As the figures below illustrates, huge infrastructure quality and spending gaps remain between countries. Crucially, pre-conditions also include different politicians’ and constituencies’ perceptions of the ideal policy combination on the one hand, and the right incentives for infrastructure development on the other. In other words, the relative strength or weakness of the governance environment can determine how developed a country’s infrastructure is. These governance differences across countries are especially visible in regulated industries where services are essential and the risk of market failure is high, such as in water and electricity utilities, ports, toll roads, and airports.

Often, incentives and special interests determine which public infrastructure investments are realized – these projects do not necessarily yield the social and economic benefits that their costs and prestige would warrant. More useful projects do not always provide as much status for politicians. However, as demonstrated by the figure below, the strength of public sector management and institutions is highly correlated with the quality of overall infrastructure across the globe. Thus, the key for any future government is to achieve the necessary political buy-in for less politically prestigious infrastructure projects, such as sewage systems rather than giant airports.

Quality of overall infrastructure, 1-7 (best), Index, 2017

Source: GovData360

Governments of the future can accomplish this by coalition-building and providing stakeholders with a greater role in the planning and design of infrastructure projects. While this process may initially be more time consuming, it can contribute to greater overall citizen satisfaction. Countries that have a well-developed stakeholder consensus building system are oftentimes as efficient in infrastructure development as countries with no such system. If projects are designed and implemented against the will of the public, demonstrations and political pushback can lead to gridlock. This happened in the German sub-terrain rail station Project Stuttgart 21 (see source for more information), which was massively delayed and incurred much higher costs due to the lack of coalition-building by local and state politicians.

Moreover, the social contract between governments and citizens may break down when governments fail in their role to provide critical infrastructure. This invariably leads to a crisis in trust as well as a crisis emanating from the infrastructure failure itself. A potent example of this is the water crisis that recently affected Jackson, Mississippi in the United States, where water was no longer safe to drink, not only directly due to flooding at a treatment plant, but because there was little political interest. This example was used on countless occasions in social media to demonstrate how the political system misallocates public resources and became an embarrassment for many politicians across different administrations.

Understanding the governance constraints that impact on infrastructure is therefore critical. The Infrastructure Governance Assessment Framework – or InfraGov for short - can help governments identify and understand such constraints and develop local solutions to address them.

Source:

Leapfrogging: the key to Africa’s development? From constraints to opportunities

Rethinking Power Sector Reform in the Developing World

Dealing with Politics for Money and Power in Infrastructure

Project Stuttgart 21

How governments can create the conditions for better infrastructure governance

Understanding the governance constraints that impact on infrastructure is critical. The World Bank Infrastructure Governance Assessment Framework can help governments identify and understand such constraints and develop local solutions to address them.

Moreover, the social contract between governments and citizens may erode when governments fail in their role to provide critical infrastructure. This can lead to a crisis in trust on top of the direct crisis emanating from the infrastructure failure itself. A potent example of this is the water crisis that recently affected Jackson, Mississippi in the United States, where water was no longer safe to drink, not only directly due to flooding at a treatment plant, but because there was little political interest. This example was used on countless occasions in social media to demonstrate how the political system misallocates public resources and became an embarrassment for many politicians across different administrations.

Governments of the future can start to address weaknesses in infrastructure governance by coalition-building and, in the right context, by providing stakeholders with a role in the planning and design of infrastructure projects. While this process may initially be more time consuming, it can contribute to greater overall citizen satisfaction. There needs to be a balance between delivery and inclusion, which is more difficult to achieve in some sectors and interventions than others. But where projects are designed and implemented against the will of the public, demonstrations and political pushback can lead to gridlock.